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Small business growth remains strong in Canada: PayNet

November 20, 2018  By PayNet

Nov. 20, 2018 – PayNet reports that the PayNet Canadian Small Business Lending Index (CSBLI) edged up to 123.1 in September 2018 from 122.6 in August 2018. The index is up 6.3% year-over-year, marking its fifth consecutive year-over-year gain after 10 months of decline.

“Business rarely expands steadily and consistently, particularly in times of disruption,” commented PayNet President William Phelan. “The continued, broad-based investment of Canadian private businesses therefore represents a welcome period of stability. In most industry segments and provinces, investments have been either rising or running at a steady rate over the prior year, which is helping to drive economic growth. Manufacturing remains an area of concern we’ll continue to monitor, as it is an important bellwether for the Canadian economy.”

On an annual basis, lending increased in most major industries, led by Transportation (+21.6% Y/Y), Accommodation & Food (+17.7% Y/Y) and Construction (+7.3% Y/Y). However, Wholesale Trade saw lending fall 3.8% year-over-year, and its current level is in the bottom 10% of all the industry’s historical readings — by far the weakest industry with respect to small business lending. Regionally, current lending levels in all major provinces remain in the top 25% of all historical readings for the respective region. Lending activity growth was highest in Atlantic Canada (+19.7% Y/Y), Manitoba (+13.6% Y/Y) and Alberta (+13.1% Y/Y). Though Saskatchewan posted the strongest gain among all regions on a monthly basis, it was the only region to see lending fall year-over-year (-4.6% Y/Y).

The PayNet Canadian Small Business Delinquency Index (CSBDI) 31-180% held steady at 0.99% from August 2018 to September 2018. On an annual basis, delinquencies rose 8 basis points in September, marking the second consecutive year-over-year increase after 16 months of decreases. Compared to year-ago levels, delinquencies fell in the majority of industries, including Construction (-11bp Y/Y) which posted its 14th straight annualized decrease after improving in each of the prior 26 months. However, delinquency levels in Manufacturing (+113bp Y/Y), Professional Services (+43bp Y/Y) and Wholesale Trade (+25bp Y/Y) are now in the top half of all historical readings. On an annual basis, delinquencies rose in most major regions, with the largest increases occurring in Manitoba (+30bp Y/Y), Ontario (+26bp Y/Y) and Alberta (+15bp Y/Y).

“Overall, we’re seeing even investment at relatively low risk among private companies in Canada, and we expect that business investment will continue to contribute positively to Canadian GDP,” added Phelan. “Investment growth is broad-based, so the risk of a rapid slowdown in the months ahead appears to be limited. Credit risk remains low, further supporting the view that the private sector remains steady and strong.”

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